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A recent analysis on stamp duty suggests that a cut of around a third in SDLT could produce a 40% surge in transactions.

Boris Johnson has stated that he wants stamp duty to be cut during his premiership, with government insiders saying this could mean the total abolition of SDLT on residential property transactions up to £500,000.

An analysis of what this could mean has now been undertaken by the chief executive of buying agency Ludgrove, Fraser Slater, who is also a former City fund manager.

Unlike some previous studies that purely focus on the impact a cut in tax rates would have on stamp duty receipts itself, the Ludgrove analysis looks at the impact on total tax revenues.

Slater says that by including an estimate of indirect taxes from property related activity — for example VAT, and corporation and employment taxes from estate agencies, conveyancers and removal firms amongst others — the analysis achieves a more accurate assessment of what a stamp duty cut would mean for total tax revenue.

Ludgrove’s favoured analysis says that a 36 per cent reduction in stamp duty rates across the board could mean a huge 40 per cent rise in residential transactions in England alone per year.

That would in turn generate an extra £1.44 billion in tax revenue and £8.36 billion in business revenue. So taken together this would mean a £9.8 billion boom for the economy and the Treasury.

If the burden of duty was shifted from buyer to seller — as some believe Johnson is considering — then even more money would be recouped, suggests the Ludgrove analysis.

Slater says: “Our analysis demonstrates the effect of what economists describe as 'The Laffer Curve', namely that tax cuts can generate more tax revenue and equally importantly more economic activity - upon which taxation itself depends.


“We exclude the impact of shifting the liability to the seller, and we would encourage the Exchequer to consider such a move. By cutting stamp duty by 36 per cent and moving the liability to the seller we are confident that our £9.8 billion estimate would be comfortably exceeded”.

 

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